International accountant and shipping consultant Moore Stephens says it is regrettable that changes announced for inclusion in the UK Finance Bill 2013 have failed to remove exchange rate distortions from the calculation of capital gains on ships.

Currently, all capital gains and losses subject to UK corporation tax are calculated by reference to sterling, with the result that capital gains and losses arising on non-sterling assets, including certain ships, can be significantly distorted by exchange rate fluctuations.

In order to avoid such distortions, the UK government has now proposed changes to these rules so that capital gains and losses in some cases can be calculated in a currency other than sterling. Under the proposed changes, where a company has a non-sterling functional currency, capital gains and losses will in future be calculated in the company’s functional currency. But this will only apply to shares and not to physical assets.

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